We believe that the Chinese economy will have a soft-landing of growth in 2012, but with strong headwinds. We expect 8.6 percent GDP growth in 2012.
There are two key elements to our view. First, we do see both external and internal risks to our growth forecasts. The biggest risk to our soft-landing call is a much worse eurozone sovereign debt crisis, while the second biggest risk is the falling property investment under the severe property tightening measures. Second, we believe the Chinese economy has a relatively healthy balance sheet and the government is flexible to adjust policy when it is necessary to deliver stable growth (moderate decline is allowed).